LIFE IN THE END ZONE: A discussion of topical issues for anyone concerned with the final phase of life by Muriel R. Gillick, MD

March 20, 2017

What We Pay

The Princeton health
economist, Uwe Reinhardt, first said it in 2004. The private think tank, the
McKinsey Global Institute, persuasively demonstrated it was true in 2008. But
maybe now that the Wall Street Journalis saying the same thing, policy makers
will listen. The elephant in the room, the main factor accounting for the high
cost of health care in the US, is prices.

The spending gap between the
US and other developed countries remains huge. We spend 17 percent of GDP on
health care (that’s all spending, public and private combined); our closest
competitor, Switzerland, manages to spend 11 percent. Other OECD countries,
such as New Zealand and Norway, spend closer to 9 percent. And despite all the
excess spending, we don’t have better outcomes across a broad range of
measures, from infant mortality to life-expectancy.

The main culprit, the WSJ
reports, is higher prices in the US. The average price of most prescription
drugs is higher here—by a lot. Avastin (an expensive medication but not the
most expensive medication there is) costs $4000 for a 400 mg vial in America and less than $2000
in western Europe. Ditto for procedures: the cost of coronary artery bypass
surgery in the US is $80,000, compared to half that in other OECD countries.
And so on, down the line. Elsewhere in
the world, the WSJ explains, state run health systems set limits on prices or
refuse to pay a supplier if the cost is regarded as excessive. Our free market
system, far from keeping costs down, drives them up.

The McKinsey Report, though a
few years old now, makes further adjustments based on a country’s wealth. It
argues that richer countries may want to spend a larger proportion of their
income on health care. But even adjusting for greater GDP per capita, the US
spent $650 billion more than “expected” in 2006. The fastest growing part of
the excess, the study showed, was due to outpatient care, both office visits
and ambulatory surgery. And what was driving up costs in these domains wasn’t
the frequency of visits—Europeans tend to go to the doctor at least as often as
their American counterparts—it was the cost per visit. Other major contributors
to the high cost of American health care are drug pricing (McKinsey found, as
did the WSJ, that we pay more in the US for a given drug than we would in other
OECD countries) and the cost of health administration (all the spending on
marketing and administration of multiple private health plans boosts costs way
over what they would be with a single payer).

I think it’s fair to conclude
that the high cost of American medicine isn’t solely—or even mainly—due to waste.
Targeting the use of less-than-optimal therapies in outpatient practice, as the
Choosing Wiselycampaign does won’t solve the cost problem. Nor will targeting
expensive, burdensome, and unwanted treatment near the end of life. These are
important efforts to improve quality of
care. But if we want to do something about cost, we need to have an impact
on prices. That means cutting payments made by insurers (both Medicare and
private insurance companies) to pricey specialists. It means allowing the
biggest and most influential insurer of all, Medicare, to negotiate with drug
companies about price. It means allowing insurers such as Medicare to pay for
devices based on their cost-effectiveness, not based on what the manufacturer
charges.

Introducing single payer health insurance would help, too. It
happens to be the only other way to cover all Americans and make health
insurance affordable and get rid of pre-existing conditions riders without use
of the “mandate” that Republicans find so very unpalatable. But that’s a topic
for another day.